Law<\/p>\n
question are indicative of the amount of
\ninformation required to comprehensively answer
\nthe question.
\nWhile the assignment is largely based on material covered, you are free to research
\nand seek advice as widely as you find necessary – there are no limitations as to
\nsources. However, sources should be appropriately referenced.
\nNote that as the assignment is for assessment purposes, more is expected than just
\nthe calculations in a tax return. If there are any issues that require clarification, you
\nshould provide a brief discussion of the matter and justify any conclusions you may
\nreach. Where there are figures provided without adequate justification, marks will not
\nbe awarded.
\nThe assignment is to be submitted online in Moodle. Submission must consist of
\none (1) document only. This document must be in Word format only ie .doc or
\n.docx. Required file name: student surname_student number_LAWS20023_ASSESS
\nQUESTION 1 (12 marks)
\nFast Ed is the owner of a new and second hand car business. He is really good at
\nwheeling and dealing in the car selling business but is not very good at
\nunderstanding the tax effect of some of his deals. Explain the tax effect of the
\nfollowing activities. (Each subsection is worth 3 marks.)
\na) Fast Ed has several different cars in stock at year-end and is not sure how to
\nvalue them or if he has different valuation options available. Explain in your
\nown words the options Fast Ed has available to value his stock.
\nb) Fast Ed gave Slick Sam, a creditor, a car, which was in stock. The car was
\ngiven in exchange for a debt of $18,000 Fast Ed owed to Slick Sam. The car
\ncost Fast Ed $17,000 and was on the showroom floor for sale for $19,000.
\nc) Fast Ed really liked one of the cars that were traded in. He took it home for
\nhis daughter who now uses it everyday. He decides he is not going to sell this
\ncar and keep it for use in the family. He purchased the car for $19,000 and it
\ncould have been sold for $21,000
\nd) Fast Ed decided to put some of the Ford hatchbacks on sale for only $18,000.
\nFord had just announced a new model hatchback and it has great reviews.
\nHe was really concerned that customers would not consider buying the older
\nmodels if he did not drastically reduce the selling price. Other dealers have
\ntold him they were \u2018not moving\u2019. The Ford hatchback had cost $22,000 and
\nwas originally selling for $28,000. At the 30 June Fast Ed had 3 in stock.
\nQUESTION 2 (21 marks)
\nVarious taxpayers receive the following amounts during the 2014\/15 income tax year:
\na) Salary income of $50,000 and a bonus of $10,000 from an employer.
\nb) A prize of $2,000 for the best TV advertisement of the year.
\nc) $500 received by an employee from an employer for costs incurred to travel
\nto Sydney for work. The employee bought a return ticket on sale for only $120
\nand stayed with a friend while in Sydney. One of the conditions of the work
\nrelated trip was that the employee could keep whatever remained of the $500
\nas long as the work required to be performed in Sydney was completed.
\nd) An iphone worth $1,000 from a client.
\ne) $10,000 awarded as damages for personal injuries incurred by an individual
\nin a car accident.
\nf) A taxpayer buys a share during the year for $5. On the 30 June, the taxpayer
\nstill owns the share but it is now trading at $7.50
\ng) A taxpayer manages to \u2018acquire\u2019 some stolen televisions. He sells 15 of them
\nand makes $10,000 during the tax year.
\nREQUIRED:
\nDiscuss the assessability or not of the above amounts. Each amount discussed is
\nworth 3 marks.
\nQUESTION 3 (6 marks)
\nBriefly explain in your own words (max 300 words) what a progressive tax rate
\nstructure is.
\nQUESTION 4 (6 marks)
\nCharles is an accountant and is keen to become a partner in one of the big
\ninternational accounting firms. In order to do so he knows that he needs to gain some
\ninternational experience. He secures a position with another large accounting firm in
\nthe US with a contract for 18 months. He sells his apartment in August 2014 in
\nSydney and buys a similar apartment a few weeks later in New York. He joins the
\nlocal gym and rugby team. He volunteers at the Lyons Club on weekends. He has
\none brother that lives in the UK and his parents have already passed away. Charles
\nis not married and has no children. At the end of the 18-month contract, Charles
\ndecides he would like to gain a little more experience and extends his contract
\nanother 12 months.
\nREQUIRED:
\nWith regards to the Domicile test, would Charles be considered a resident or not of
\nAustralia for the 2014\/15 income tax year? Discuss the factors the ATO would
\nconsider in making their decision.
\nQUESTION 5 (15 marks)
\na) Josh owns a boat that his neighbor, Ben, is interested in buying but Ben
\nwants to try out the boat first. On the 1 January 2015 Jim agrees to hire the
\nboat to Ben and the agreement provides that Ben will buy the boat at the end
\nof three years unless Ben decides to buy the boat sooner. Josh agrees that, if
\nBen does buy it, Josh will apply the hire fees against the agreed purchase
\nprice. Some months later, Ben inherits some money and advises Josh he
\nwould like to buy the boat. The sale is concluded on the 1 June 2015.
\nb) Mark acquired an asset on 1 June 2008 for $50,000 and on the 29th June
\n2015 the asset is destroyed by fire. The asset was not insured.
\nc) On the 1st of June 2015 Joe grants Ashleigh the option to purchase his beach
\nhouse in Byron Bay. Ashleigh pays $2,000 for the option.
\nd) John purchased a property on 1 July 2009 for $250,000. The property was
\nrented out between 1 July 2009 and 30 June 2010. From 1 July 2010, he
\nused the property for his main residence until it was sold on the 30 June 2015
\nfor $400,000. (Calculations to be performed in years and not days.)
\ne) Steve acquires a home in July 2005 for $375,00. In March 2008 he converts
\nthe separate garage into an office for his financial planning business and
\ncommences business. The garage comprises 20% of the floor space of the
\nhome. He sells the property in December 2014 for $700,000. The market
\nvalue of the house in March 2008, when the garage was converted for
\nincome producing use was $500,000.
\nREQUIRED:
\nWith reference to each of the above situations, outline the Capital Gains Tax
\nconsequences of the transactions. Each subsection is worth 3 marks.<\/p>\n","protected":false},"excerpt":{"rendered":"
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